The payment to HUDA is, in effect, payment to State Government and therefore such payment is exempt from obligations to deduct TDS in view of Section 196 of the Act. In the case of Perfect Constech Pvt. Ltd. vs. Additional Commissioner of Income Tax in ITA No.6907/Del /2019 order dated 29.12.2020 wherein Co-ordinate Bench found that the provisions of Section 194C are not applicable on payments to agencies like HUDA on behalf of the State Government . The imposition of penalty under Section 271C was consequently found to be unsustainable in the absence of default of Section 194C of the Act. The facts and issue being identical , in the light of the clarification noted above coupled with view taken by the Co-ordinate Bench in the identical facts situation, we see no reason to depart therefrom. Consequently, we find merit in the plea raised on behalf of the assessee for cancellation of penalty imposed under Section 271C of the Act .”

In consonance with view taken by the Co-ordinate Bench, we hold that imposition of penalty of Rs.4,95,273/- under Section 271C of the Act for the Assessment Years 2015-16 in question is not justified. In parity with the findings of the Co-ordinate Bench, the assessee has not committed any violation of provision of Chapter XVII B of the Act by making payment towards EDC charges to DGTCP Haryana through HUDA without deduction of TDS.